# LAW-0004 - Employee or contractor (Australian common law, post-2022 High Court approach)

*This is a benchmarking hypothetical, not legal advice. The analysis applies the approach the High Court of Australia adopted in 2022, as at FY2025-26.*

## (a) Classification

Classification: employee

## (b) The controlling approach and the leading case

**Leading case:** *Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd* [2022] HCA 1; (2022) 275 CLR 165 (decided 9 February 2022), with its companion case *ZG Operations Australia Pty Ltd v Jamsek* [2022] HCA 2.

**The controlling approach.** Where the parties have committed the terms of their relationship to a comprehensive written contract, and that contract is not a sham and is not otherwise challenged for validity (not varied, waived, rectified or set aside as a sham), the character of the relationship - employee or independent contractor - is determined by construing the **legal rights and obligations created by that contract**. The Court does not undertake a wide-ranging review of the entire history of the parties' subsequent conduct and dealings to find the "real substance, practical reality or true nature" of the relationship. That older, conduct-focused "multifactorial" approach (associated with how *Stevens v Brodribb Sawmilling* and *Hollis v Vabu* had come to be applied) was rejected as the governing method for a wholly-written, non-sham contract.

What remains is a **principled, contract-based application of the established indicia**: the central question is whether, on the proper construction of the contractual rights and obligations, the person is working **in the service of another (as an employee) or on their own account (in their own business)** - the "own business / employer's business" distinction (Windeyer J in *Marshall v Whittaker's Building Supply Co*, endorsed by the majority). The **right to control** how, where and when the work is done remains the most significant indicium, but it is now assessed as a matter of contractual right rather than by reference to how control was in fact exercised.

**Application to the facts.** Here the contract is comprehensive, wholly in writing, and not a sham, so the relationship is determined from its terms. Construing those terms:

- The company has the contractual **right to control** how the labourer carries out the work, and directs what work he does and when and where he does it (on the client's sites). A contractual right to control is the hallmark of employment.
- He must do the work **the company directs** - he is working in the company's business of supplying labour, not conducting any business of his own.
- He has **no business of his own**, supplies **no significant equipment**, and **cannot delegate** (no right of substitution). The absence of an unlimited right to delegate, the absence of capital/equipment, and the absence of any independent enterprise all point firmly to service.
- The contractual **label** "self-employed contractor" is **not determinative**. A descriptive label the parties attach to themselves cannot change the character of a relationship that, on the rights and obligations actually created, is one of employment. (On the *Personnel Contracting* facts, this is the "Mr McCourt" scenario, and the High Court held the young labourer was an employee notwithstanding the "self-employed contractor" wording in the labour-hire/ODCO-style contract.)

On the construction of the contractual rights and obligations - right of control, integration into the company's labour-supply business, no delegation, no equipment, no business of his own - the labourer is an **employee**, and the contractual self-description does not displace that conclusion.

## (c) One practical consequence for the engaging business

Because the labourer is an **employee**, the engaging business carries the **legal obligations and liabilities of an employer** rather than those of a principal dealing with a contractor. Any one of the following is a correct practical consequence:

- It must make **compulsory superannuation guarantee contributions** on his ordinary time earnings (and is exposed to the superannuation guarantee charge, plus penalties and interest, if it has not been paying super on the basis that he was a contractor).
- He is covered by the **Fair Work Act 2009 (Cth) and the relevant modern award / National Employment Standards**, so the business owes minimum award wages, leave entitlements (annual, personal/carer's), notice of termination and unfair-dismissal protections, and is exposed to **underpayment / wage-theft back-pay claims** if it has paid contractor rates.
- It must **withhold PAYG income tax** from his wages, and the wages count towards its **payroll tax** liability and its **workers' compensation** premiums and cover.

(One such consequence is sufficient; the unifying point is that the business is now liable for the full suite of employer obligations - superannuation, award/NES entitlements, PAYG withholding, and workers' compensation - rather than treating the engagement as a contractor arrangement.)

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## Note on approach

The fact pattern (a young labourer; a comprehensive, wholly-written, non-sham contract; a labour-hire company; a "self-employed contractor" label; company control over the work; no business, equipment or right to delegate) is the *Personnel Contracting* scenario almost point for point. I therefore:

1. Identified the controlling 2022 High Court authority (*CFMMEU v Personnel Contracting* [2022] HCA 1, with companion *ZG Operations v Jamsek* [2022] HCA 2) and stated the contract-primacy approach it adopted - construe the legal rights and obligations in the written contract; do not rove over subsequent conduct where the contract is comprehensive and not a sham; apply the established indicia (especially the contractual right of control and the "own business vs employer's business" distinction); treat the parties' label as not determinative.
2. Applied that approach to each given fact (right to control, integration into the company's business, no delegation, no equipment, no own business, and the non-determinative label) to reach the classification of **employee**.
3. Stated a concrete employer-side consequence of that classification (superannuation guarantee being the cleanest single example, with award/NES, PAYG withholding and workers' compensation as equally valid alternatives).